This matter was before the Court on the cross-motions for summary judgment filed by Defendant and Plaintiffs, on a variety of issues arising from Defendant’s purported use of the Fluctuating Workweek (FWW), to calculate Plaintiffs’ overtime compensation. As discussed partially herein, Defendant’s motion was denied in its entirety and Plaintiffs’ motion was granted in part and denied in part. Significantly, the Court held that Defendant’s purported use of the FWW violated the FLSA for a variety of reasons, and under such circumstances, Plaintiffs’ damages were to be calculated using the FLSA’s default time and a half method not the FWW, as Defendant’s had proposed.

After outlining the applicable law, the Court first discussed the Defendant’s infrequent docking of Plaintiffs’ pay, ruling that same necessarily resulted in a failure to comply with the stringent requirements of 29 C.F.R. 778.114, and thus Defendant was not entitled to summary judgment.

“With respect to decreases in the fixed salary, regulation calls for a fixed salary regardless of the length of the workweek. 29 C.F .R. § 778.114 (“An employee employed on a salary basis may have hours of work which fluctuate from week to week and the salary may be paid him pursuant to an understanding with his employer that he will receive such fixed amount as straight time pay for whatever hours he is called upon to work in a workweek, whether few or many.”). An employer may deduct from an FWW employee’s vacation time bank for workdays missed, but may not deduct from the fixed salary for time an FWW employee misses from work. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). Similarly, the DOL stated that “it is the longstanding position of the Wage and Hour Division that an employer utilizing the fluctuating workweek method of payment may not make deductions from an employee’s salary for absences occasioned by the employee[,]” unless the deductions are of a nonroutine disciplinary nature “for willful absences or tardiness or for infractions of major work rules.” DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006).

Several of the cases cited by the parties are not on point with respect to the issue of salary decreases under the FWW. Although Aiken v. County of Hampton discusses the FWW, its ruling on the fixed salary requirement relates to deductions from accrued vacation banks and the effect of legal holidays that are not at issue in the instant matter. 977 F.Supp. 390, 395-97 (D.S.C.1997). Lance v. Scotts Co. addresses the effect of commissions on FWW calculations, something governed by 29 C.F.R. § 778.118, a regulation not at issue here. No. 04-5270, 2005 WL 1785315, at *4-7 (N.D.Ill. Jul. 21, 2005) (Keys, M.J.). Rau v. Darling’s Drug Stores, Inc. addresses not the existence of a fixed weekly payment, but the correct calculation of damages for a non-exempt, salaried employee. 388 F.Supp. 877, 883-86 (E.D.Pa.1977). In Spring v. Washington Glass Co. the parties stipulated to the use of the FWW to calculate overtime pay damages, so the issue of whether it applied was never contested before that court. 153 F.Supp. 312, 318-19 (W.D.Pa.1957).

Defendant does, however, cite Cash v. Conn Appliances, Inc., 2 F. Supp 2d 884, 906 (E.D.Tx.1997), which supports the proposition that it did not violate the FWW when it docked inspectors for missing work. Cash read the regulation as permitting an employer to dock pay when an employee failed to show up for scheduled work. 2. F. Supp 2d at 906 (“The docking policy only called for a loss of pay for absences during scheduled time; it in no way sanctioned reducing pay because of a failure to assign a coefficient employee forty hours of work for a week.”). Cash also holds that occasional violations of FWW requirements do not result in a broad invalidation of the method when calculating damages. Id. This Court fails to find the Cash interpretation of the regulation persuasive as to docking of employees’ pay. First, the regulation itself specifies that the fixed salary must be paid regardless of hours worked without reference to which party is responsible for the shortfall. 29 C.F.R. § 778.114 (“The ‘fluctuating workweek’ method of overtime payment may not be used unless … the employer pays the salary even though the workweek is one in which a full schedule of hours is not worked.”). Second, the DOL’s interpretation of the regulation denies employers the ability to routinely dock the fixed FWW salary. DOL Opinion Letter, 2006 WL 1488849 (May 12, 2006); DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999).

Here, Defendant concedes that on at least one occasion, it docked a Plaintiff inspector’s fixed salary for an impermissible reason. (Def. Reply Br. at 6.) Although it characterizes such an event as statistically insignificant, such an argument goes to weight. This Court, therefore, denies summary judgment to Defendants on the issue of whether they complied with the FWW method of paying the Plaintiff inspectors.”

Next, the Court held that the addition of certain premium pay into Plaintiffs’ straight time pay each week resulted in non-fixed straight time pay, and thus violated the requirements for use of the FWW, in lieu of the default time and a half methodology required by the FLSA.

“The relevant language in the regulation regarding additional payments to FWW employees reads as follows: “[w]here all the legal prerequisites for use of the ‘fluctuating workweek’ method of overtime payment are present, the Act, in requiring that ‘not less than’ the prescribed premium of 50 percent for overtime hours worked be paid, does not prohibit paying more.” 29 C.F.R. § 778.114(c). Department of Labor (“DOL”) Opinion Letters interpreting the FWW regulation have weighed in on the issue of additional payments. The DOL has stated that an employer can make additional payments to an FWW employee for a holiday occurring in a given week. DOL Opinion Letter, 1999 WL 1002399 (May 10, 1999). An employer may also pay employees more than the minimum calculated rate under the FWW method for overtime. DOL Opinion Letter, 2002 WL 32255314 (Oct. 31, 2002).

Courts interpreting the FWW, however, have emphasized that additional payments can result in the finding that there is no fixed salary. Although the court in O’Brien v. Town of Agawam found that variations in the weekly pay of law enforcement officers for other reasons prevented the finding of a fixed FWW salary, it used this reasoning with regard to incentive payments:

The officers’ compensation varies from week to week even without reference to the number of hours worked. Any officer required to work a nighttime shift receives money-expressly termed “additional compensation” under the CBA-in the form of a $10 shift-differential payment added to his check for the week. The Supreme Court has specifically held that such shift differentials, when paid, are part of the worker’s regular rate of pay. Bay Ridge Operating Co. v. Aaron, 334 U.S. 446, 468-69 (1948). So while the shift differential itself may be small, it requires the larger conclusion that most officers do not receive a “fixed amount” for their straight-time labor each week. 350 F.3d 279, 288-89 (1st Cir.2003). See also Dooley v. Liberty Mut. Ins. Co., 369 F. Supp 2d 81, 86 (D.Mass.2005) (following O’Brien ). Similarly, Ayers v. SGS Control Servs., Inc. found that employees performing similar work to the inspector Plaintiffs in this case did not receive a fixed salary because they received lump-sum “day-off pay” and “sea pay” for working on their days off and on offshore vessels. No. 03-9077, 2007 WL 646326, at *8-10 (S.D.N.Y. Feb. 27, 2007). Finally, a case in this District, Adeva v. Intertek USA, Inc., stands for the proposition that shift premiums preclude application of the FWW. No. 09-1096, 2010 WL 97991, at *2-3 (D.N.J. Jan. 11, 2010) (Chesler, J.). “The record demonstrates that Plaintiffs’ compensation for non-overtime hours varied, depending upon earned offshore pay, holiday pay or day-off pay. The Court is convinced that due to such payments, Plaintiffs cannot receive the fixed salary required to apply the FWW.” Id.

Some of the cases brought forth by Defendant are inapposite. See, e.g., Clements v. Serco, Inc., 530 F.3d 1224, 1230-31 (10th Cir.2008) (commissions under the FWW); Lance, No. 04-5270, 2005 WL 1785315, at *4-7 (same). Two, however, are potentially instructive. In Cash, discussed supra, the court found that the defendant had failed to incorporate bonuses into its calculation of the regular rate, thereby decreasing plaintiffs’ overtime, but that such failure was considered insufficient to deny the defendant the benefit of the FWW. 2 F. Supp 2d at 893 n. 17, 896, 908. The court in Aiken found that an employer’s payment of holiday pay to a law enforcement officer who worked on a holiday did not result in the absence of a fixed salary. 977 F.Supp. at 399-400. The reasoning used in Aiken was that the employee would have received the holiday pay anyway, regardless of whether or not the employee worked the holiday, and that the holiday pay simply operated as a permissible increase in overtime pay under the circumstances. Id.

This Court finds that Cash and Aiken can be distinguished on their facts. Cash dealt with employees of an appliance store; Aiken dealt with law enforcement personnel. The only cases brought to this Court’s attention that deal with inspectors similar to Plaintiffs are Ayers and Aveda, and this Court finds their reasoning persuasive as to the applicability of the FWW to this case, not only because of the factual similarity, but because they give meaning to the plain language of 29 C.F.R. § 778.114. Plaintiffs were paid day off pay and holiday pay in addition to their regular salary and overtime. (Def. R. 56.1 Statement ¶¶ 15, 39, 41.) For example, Camin concedes that the use of day off and holiday pay resulted in the one inspector’s non-overtime earnings varying from $1,670 to $2,170 over two pay periods. (Def. Opp. R. 56.1 Statement § 23.) Such a scheme results in the absence of the “fixed salary” required by the regulation. 29 C.F.R. § 778.114(a); Aveda, No. 09-1096, 2010 WL 97991, at *2-3. This Court therefore grants Plaintiffs’ motion for summary judgment on the issue of whether Defendant’s policies and practices violated the FLSA due to the absence of the fixed salary requirement, and declines to reach the remaining arguments of the parties on the FWW. Adeva, No. 09-1096, 2010 WL 97991, at *3.”

Having held that the Defendant’s pay structure violated the FLSA, the Court next turned to the issue of how to calculate Plaintiffs’ damages, and held that the appropriate measure of damages was the FLSA’s default time and a half, not the FWW as Defendant had argued.

“Camin moves this Court to find that any liability it is subject to for violation of the FWW method of calculating pay be done so according to the FWW method. (Def. Br. at 24-27.) It maintains that such a measure of damages is permissible where the violation is computational as opposed to a violation of the clear understanding requirement or the minimum wage. (Id. at 24-25.) Plaintiffs argue that such a damages calculation is impermissible where a prerequisite to the FWW has not been met by the employer. (Pl. Opp. Br. at 24-26).

The primary case relied upon by Camin is Cash. The discussion of the FWW in Cash is quite broad, and describes the measure of damages available in FWW claims under many factual scenarios. 2 F. Supp 2d at 896-97. Cash noted that under the FWW, “[l]iability arises if the employer either miscomputes overtime pay or uses the fluctuating workweek method despite the absence of one or more of the criteria for doing so[,]” but differentiated between the types of violation in which damages were available. Id. at 896. The discussion of the available remedies breaks down into two broad categories: those where the measure of damages would be calculated under the FWW and those where overtime compensation would be adjusted so that it would be recalculated at the default FLSA rate of “time-and-a-half” overtime. Id. The following violations were permitted damages calculations under the FWW in Cash: “[e]mployer infrequently violated the minimum wage criterion and failed to cure its breaches fully[,]” “[e]mployer infrequently violated the minimum wage criterion and made no effort to cure its breaches[,]” and “[e]mployer made a computational mistake.” Id. at 896-97. Cash found that the following violations abrogated the FWW: “[e]mployer regularly violated the minimum wage criterion” and “[e]mployer violated the clear understanding criterion, full schedule criterion or both.” Id. at 896. The Cash court only considered failure of an employer to provide a fixed salary insofar as such a failure would lower overtime rates. Id. at 896.

Although this Court finds the discussion of damages in Cash useful, it is not entirely persuasive. This Court found supra that the fixed salary requirement of the FWW was violated. The regulation states that the fixed salary is a prerequisite to use of the FWW method. 29 C.F.R. § 778.114(c). The Cash court found that when other prerequisites of the FWW method were systematically violated, that the employer could not obtain the benefit of the FWW in calculating damages, but failed to reach the same conclusion concerning the fixed salary. Id. at 896. Instead, this Court finds the pre-trial motions opinion in Ayers v. SGS Control Servs., Inc. persuasive. No. 03-9078, 2007 WL 3171342, at *1-3 (S .D.N.Y. Oct. 9, 2007) (“Ayers II” ). In Ayers II, the Court found that as the defendant had violated the fixed salary requirement of the FWW method, it could not have damages calculated under the FWW method. No. 03-9078, 2007 WL 3171342, at *2. The Court held that the proper measure of damages was the default FSLA method: “time-and-a-half for all hours over 40.” Id. at *3. This Court finds that the default FSLA damages calculation, “time-and-a-half for all hours over 40,” will also apply to Plaintiffs who have suffered FWW violations in this case, and that summary judgment on this issue is denied to Defendant.”

Although not discussed here, the Court ruled that the factual issues precluded a finding regarding liquidated damages, and the length of the statute of limitations, at the summary judgment stage.

This case is one of several pending against Oil & Gas Inspection companies currently. To read more about a similar case, brought on behalf of OGC Inspectors at Inspectorate America, click here. You can also learn more about similar separate cases pending against Intertek Caleb Brett, Saybolt, Amspec and Inspectorate America by calling 1-888-OVERTIME.